Note: the English Court of Appeal, in a
decision dated 15 April 2003, has overruled the decision at first instance in
this case and held that the nine-months time limit for bringing proceedings in
Clause 30(B) of the British International Freight Association Standard Trading
Conditions satisfied the test of reasonableness under the Unfair Contract Terms
Act of 1977.
To see the a note of the Court of Appeal's judgment, click here

Summary
Davies Turner contracted with Granville to arrange for the packing and carriage
of a consignment of return paint products from Kuwait to the UK. The court held
that Davies Turner had contracted as principal, not as agent, and that the
contract incorporated the BIFA 1989 Standard Trading Conditions. Davies Turner
tried to rely on a nine-month limitation for suit provision in those terms. The
judge held that this clause was unreasonably wide and draconian in its effect.
Whilst some form of time bar might be reasonable for some forms of liability, it
was not fair for a time bar of nine months to apply to 'all liability whatsoever
howsoever arising in respect of services provided'. He held accordingly that the
clause was void under the Unfair Contract Terms Act 1977 and that Davies Turner
could not rely upon it.

DMC Category Rating: Developed

Facts
Davies Turner contracted with the claimants, Granville Oils, to pack and carry
to Granville’s works in the UK a return consignment of paint in drums from
Kuwait. The quotation sent from Davies Turner to Granville made specific
reference to their standard trading conditions, those of BIFA (British
International Freight Association) 1989. Small print at the bottom of the
quotation repeated that business "shall solely be conducted in accordance
with BIFA standard conditions. These conditions have clauses which may limit or
exclude our liability…" The prices quoted by Davies Turner, although
broken down into the constituent services, included a mark-up on the prices
quoted to Davies Turner by their agents in Kuwait. Davies Turner did not
disclose the agents’ prices to Granville.

Davies Turner arranged insurance on the consignment on behalf of
Granville. Davies Turner told Granville that the cover was on Institute Cargo
Clauses – A- (‘all risks’ terms). In fact, this was a mistake; under the
terms of the Davies Turner open cargo cover, against which this shipment had
been declared, return cargoes were only insured under the A clauses, if they had
been inspected prior to shipment. No inspection took place in this case;
accordingly, the consignment was covered only on Institute Cargo Clauses – B.
Under these clauses, the cargo was insured only in respect of specified (named)
perils.

The paint was shipped from Kuwait in two 20 foot containers in
late November/early December 1999 and arrived in Southampton, UK, early in
January 2000. From there the consignment was delivered to Granville’s works in
Rotherham. On arrival, the consignment was found to be damaged, the cause of the
damage being, according to the cargo underwriters’ surveyor, "poor
stowage and inadequate restraint within the containers". Granville held
Davies Turner responsible; Davies Turner referred the claim to their cargo
underwriters.

In June 2000, the cargo underwriters rejected the claim, as the
cause of damage was not an insured peril under the ICC B clauses. Davies Turner
did not, however, make this information available to Granville until late
August, by which time nine months had passed since the causative event. On 20 September 2000, Granville commenced proceeding against Davies
Turner. Davies Turner defended the claim on two principal grounds.
Firstly, they had contracted with Granville as agents, not as principals.
Secondly, the claim against them was timebarred under clause 30(B) of the BIFA
Conditions, which read:
"…. The Company (Davies Turner) shall in any event be discharged of all
liability whatsoever howsoever arising in respect of any service provided for
the Customer or which the Company has undertaken to provide unless suit be
brought and written notice thereof given to the Company within nine months from
the date of the event or occurrence alleged to give rise to a cause of action
against the Company".

Judgment
In his judgment, Judge Behrens QC found that the BIFA conditions had been
incorporated into the contract between the parties, by reason of the reference
to them in the key quotation telexes. He also found that Davies Turner had
contracted as principals, not as agents. In deciding this point, he applied the
criteria set out by Mance J. (as he then was) in the case of Aqualon v. Vallana
[1994] 1 Lloyd’s Rep. 669. These were:

the terms of the particular contract, including the nature of the
instructions given;

any description used or adopted by the parties in relation to the
contracting party’s role;

the course of any dealings, including the manner of performance – at
least so far as it throws light on the way in which the parties understood
their relationship;

the nature and basis of any charging (in particular, whether an all-in fee
was charged, leaving the contracting party to make such profit as he could
from the margin between it and the costs incurred;

the nature and terms of any CMR note issued (not relevant in this case).

In reaching his conclusion, the judge named the following as the
most important factors:

the method of charging adopted by Davies Turner;

the lack of disclosure in relation to Davies Turner’s profit and/or
commission;

the fact that Davies Turner accepted that they were personally responsible
for the costs incurred by their Kuwait agents and the ocean carrier (who
also arranged delivery in the UK).

In considering clause 30(B) of the BIFA conditions, the judge
noted that it had the following features:

it was "in extremely wide terms. It is not, for example, limited to
liabilities for which Davies Turner might have a right to indemnity under an
equivalent or similar contract";

its effect is more draconian than the Limitation Act, in that its effect
is to discharge Davies Turner from liability;

not only must suit be brought within nine months but written notice of the
suit must be given within the same nine months. Time runs from the date of
the event giving rise to the cause of action against Davies Turner;

there is no power to extend the time limit in the case of fraud or other
circumstances which might mean that Granville did not discover about the
time limit within the nine month period.

In the circumstances of this case, the breach giving rise to
the claim was the failure of Davies to insure the cargo on All Risk terms. The
breach occurred on 4 November 1999; the nine-month time limit expired
accordingly on 4 August 2000. At that time Granville were still unaware that
the insurance had not been effected on ICC – A terms. Granville could never,
therefore, have issued proceedings within the nine months time limit under the
clause.

In considering the authorities, the judge referred to the
substantial expert evidence given in the case of Shenkers v. Overland Shoes
Ltd. [1998 1 Lloyd’s List Rep. 498. In that case the judge had accepted
evidence that the BIFA Conditions had been drafted in consultation between the
forwarding industry and representatives of cargo interests and were widely
accepted as a reasonable and fair allocation of risk as between the parties.
He had concluded that, "in a situation in which there was no significant
inequality of bargaining position, the customs of trade were an important
factor".

In the present case, the judge had no such expert evidence
before him and, in the end, he favoured the approach of Judge Kenny in the
Kingston County Court in the case of Overseas Medical Supplies v. Orient
Transport [1999] 2 Lloyd’s Law Rep. 273, who had held unreasonable a clause
in the BIFA conditions purporting to limit the forwarder’s liability for failure to insure.

Judge Behrens' conclusions were as
follows:
"The difficulty, as I see it, lies in the width of clause
30(B). Whilst it might be reasonable to have some form of time bar in relation
to claims where there is a direct right of indemnity, I can see no
justification for it in many other claims. If a forwarding agent fraudulently
conceals a claim (such as retaining a secret profit) why should he be
discharged [of liability] after nine months? Similarly, if a forwarding agent
fails to effect insurance, it is difficult to see why he should be excused
after only nine months. As the facts of this case show, nine months is not a
long time. These cases involve international trade where investigations can
take time".

He accordingly found that it was not fair and reasonable for
there to be a time bar of nine months for "all liability whatsoever and
howsoever arising in respect of any service provided for the Customer".
It followed that clause 30(B) was void under the Unfair Contract Terms Act
1977 and Davies Turner could not therefore ely upon it.

Comment
This decision is going to cause concern at BIFA and for the many trade
associations which have similar trading conditions. A nine-month limitation
clause is also found in bills of lading based on the ICC/UNCTAD Rules for
Multimodal Bills of Lading, 1992, such as the FIATA FBL.

By its terms, the Unfair Contract Terms Act does not apply to
a) a negotiable bill of lading, providing for
international carriage, concluded between parties from different states, -
s.26(3) and (4);
b) a contract for the carriage of goods by ship, unless the
claimant 'is dealing as a consumer' - Schedule 1, ss.2 and 3.

As regards the possibility of appeal, the judge said at the
conclusion of his judgment that he is "provisionally not minded to grant
permission to appeal."

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